This is part 3 of my series of posts on the statistics of financial markets. Part 1 is here.

In previous posts, I have found that working in log prices makes sense and that the double exponential distribution is a good fit to price change data. In this post, I will look at correlations over time in price changes.

This is part 2 of my series of posts on the statistics of financial markets. Part 1 is here.

I have established that a double exponential distribution fits price movements when they are converted to log prices, at least for bitcoin, Apple, and Dell. (Actually I have checked it on a few other NASDAQ stocks too.)

Once we have a statistical model, we can generate some data to see if it produces results that look like the actual price graph. Below you can see the real 2 month bitcoin price graph, together with two graphs that were obtained by using a model based on the Continue reading →

This series of blog posts is intended to document some mathematical analysis that I have been doing on the bitcoin price graph and on price histories of securities in the stock market. The purpose is to understand something about the statistics of these price movements, and to learn about the behavior of the stock market in general.

One thing that is useful about bitcoin is that trading is never stopped. Because everything runs 24 hours 7 days per week, there are no artifacts to do with starting and stopping trading on specific exchanges and transitioning between financial Continue reading →

Bitcoin has been facing trouble this week due to a series of crackdowns by the Chinese government. First, the People’s Bank of China stated that bitcoins did not qualify as currency and barred its banks and payment systems from being involved. Later, this ruling was extended to third party payment processors, meaning that bitcoin could only be exchanged in private transactions. The initial justification given was that people must be protected from speculation and wild changes in price – but the chilling effect has led to bitcoin losing half of its value. Presumably Chinese investors must now return to property speculation.

Negative reactions from government agencies, law enforcement, and established financial businesses are to be expected because they see digital currencies as a threat to their existing systems of checks and controls over financial transactions, their ability to regulate the market, to implement monetary policy, to protect consumers, and to oppose organizedContinue reading →